Startup Advice from Peter Thiel

Peter Thiel has pedigree. Billionaire, one of the Paypal founders, CEO of Palantir. Worked with Elon Musk and Reid Hoffman. When he talks, as a start up you should probably listen.

No progression since 70s

His starting point is that we have not progressed much since the ‘70s. With the exception of IT and the internet, not much has happened. He is disappointed. We should be living on the moon by now. Since the 70’s most changes have been mostly iterative.

Sentiment

He links that to the different sentiment across the globe.

Indefinite Pessimism

An indefinite pessimist looks out onto a bleak future, but he has no idea what to do about it. This describes Europe since the early 1970s, when the continent succumbed to undirected bureaucratic drift.

Definite Pessimism

A definite pessimist believes the future can be known, but since it will be bleak, he must prepare for it. China is probably the most definitely pessimistic place in the world today.

Definite Optimism

To a definite optimist, the future will be better than the present if he plans and works to make it better. This is the one he likes.

Indefinite optimists

To an indefinite optimist, the future will be better, but he doesn’t know how exactly, so he won’t make any specific plans.

Not planning

His book is a plea to people to take control, use their heads and stop being a lottery ticket. You need to play smart. Become a definite optimist.

What should you do?

First of all you should plan. Indefinite is not an excuse for not planning. A business with a good definite plan will always be underrated in a world where people see the future as random.

You should not apply lean

Forget about lean. Lean is code for “unplanned.” You should know what your business will do. Trying things out, “iterate,” and treat entrepreneurship as agnostic experimentation is a bad, bad idea.

Forget “minimum viable products”—ever since Jobs started Apple in 1976, Jobs saw that you can change the world through careful planning, not by listening to focus group feedback or copying others.

Focus on next practice

Today’s “best practices” lead to dead ends; the best paths are new and untried. The next Bill Gates will not build an operating system. The next Larry Page or Sergey Brin won’t make a search engine. Incremental advances and improving on the competition is useless. It is not sustainable.

Create a monopoly

What valuable company is nobody building? It is the key question. Why step into a crowded space? If you want to create and capture lasting value, don’t build an undifferentiated commodity business. In the real world outside economic theory, every business is successful exactly to the extent that it does something others cannot. You want to build a monopoly.

Monopoly is the condition of every successful business. All failed companies are the same: they failed to escape competition. To crate an economy you need to be 10 times better, you have to be able to control or create a niche, you have to create a brand and you need to be able to scale.

And that is the key message of the book. Step away from the red ocean into the blue ocean. Focus on being unique.

His other pieces of advice

Take a long term perspective

Become a master of your trade

Work only with people you know and like

Create a cult culture with a focus on purpose and full buy in by all

Never outsource recruitment

Focus, focus, focus

Ignore selling at you peril, it is not only about the product

Only have 3 people on your board

Don’t hire tech entrepreneurs that wears a suit

Focus on durability, not growth

Friction kills

Focus on one channel

Give each person on your team just one thing to do

Design is important

His golden rule

The total net profit that you earn on average over the course of your relationship with a customer (Customer Lifetime Value, or CLV) must exceed the amount you spend on average to acquire a new customer (Customer Acquisition Cost, or CAC).

The start up checklist

The engineering question: Can you create breakthrough technology instead of incremental improvements?

The Timing Question: Is now the right time to start your particular business?

The Monopoly Question: Are you starting with a big share of a small market?

The People Question: Do you have the right team?

The Distribution Question: Do you have a way to not just create but deliver your product?

The Durability Question: Will your market position be defensible 10 and 20 years into the future?

The Secret Question: Have you identified a unique opportunity that others don’t see?

The rally cry for entrepreneurs

Our task today is to find singular ways to create the new things that will make the future not just different, but better—to go from 0 to 1. The essential first step is to think for yourself. Only by seeing our world anew, as fresh and strange as it was to the ancients who saw it first, can we both re-create it and preserve it for the future.